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Understanding Your Title Commitment

During the home buying process, buyers typically have to go through the steps of getting a title insurance policy, whether it's the Owner's policy and the Loan policy, or just the Loan policy itself. One of those steps is to request for a title commitment to be completed and to review that report once the title insurance company sends it to you. But what exactly is a title commitment and what does it entail? This week, we'll go over in detail what it is and what information it provides to home buyers and the title company.

What is a Title Commitment?
A title commitment is basically the title company’s promise to issue a title insurance policy for the property after closing. The title commitment contains the same terms, conditions, and exclusions that will be in the actual insurance policy. Almost every purchase and sale agreement contains language requiring the seller to provide the buyer with title insurance. At Arrowhead Title, we issue the title policy using forms distributed by the American Land Title Association (ALTA).

Now, we understand that if you don't review these documents on a regular basis, they can be difficult to understand. And not every transaction is the same, so they may require different documentation depending on your particular transaction. So to make it easier, here is what the documents in a typical title commitment go over.Schedule A

This is the information submitted to our title department by the escrow officer. It contains the basic information given to us by the buyer or real estate agent such as the legal description of the property, sale price, loan amount, lender, name and marital status of buyer and seller.

Schedule B

The Schedule B are items which are tied to the subject property. These include Covenants, Conditions and Restrictions (CC&Rs), easements, homeowner’s association by-laws, leases and other items which will remain of record and transfer with the property. They are referred to as “exceptions” because the buyer will receive a clear title, “except” the buyer’s rights will be subject to conditions in the CC&Rs, recorded easements, etc. Schedule B is the most important part of the title commitment. Buyers should pay close attention to it.

A Schedule B is broken down into 2 parts: the requirements and the exceptions for issuance of the policy:Requirements

This section lists the things that must be addressed in order for title insurance to be issued. If one of the requirements cannot be met, this will affect escrow, so the buyer should inform the escrow officer immediately. Requirements can include things like:

Tax payments

Recording the new deed

Recording loan documents

Release of liens

Proof of identity

Exceptions

This section lists what is not covered under title insurance. In order for a buyer to fully understand the coverage of the title insurance on the property, the exceptions section should be read carefully. If any of the exceptions are unacceptable to the buyer, it might be possible for the title company to remove them, insure over it (with the use of an endorsement), or discard it with a release or affidavit.

It's important that if there’s anything that strikes you as unusual in this section to have a conversation with the title insurance company or your attorney. It’s better for you to understand the stipulations and gain clarification now than find out later you left yourself exposed by not fully reviewing the document.

A title commitment is one of the most important documents in closing because it details what is covered and not covered in the title insurance policy, and it also outlines items that may be clouding the title. Without one it’s impossible to understand the stipulations and exclusions of the title insurance. You may be leaving yourself open to future legal challenges, if you don’t examine it carefully. For more information about title commitments, contact the best title insurance agent at the Lake of the Ozarks. We'll be happy to help you understand your title commitment and can answer any questions about any of the documents that may arise.

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